Santam’s offer of three-month settlements for clients with Covid-19 business interruption claims has drawn harsh criticism from specialist loss adjuster Insurance Claims Africa (ICA), which has accused SA’s largest short-term insurer of trying to take advantage of clients desperate for cash.
Santam is seeking to appeal against a 2020 judgment in favour of ICA and Ma Afrika Hotels that found it liable for 18 months of cover and forced it to more than double its provisions, but ICA maintains the insurer’s current offer to other clients of “full and final” three-month payments to settle claims is “unconscionable”.
ICA CEO Ryan Woolley said on Wednesday that Santam was using a “legal side step” to reduce its payouts to clients hit hard by Covid-19, and the insurer should instead be offering interim three-month payments, pending an outcome of its court challenge.
“These actions suggest it is no longer legal certainty that Santam seeks, but that it is trying to take advantage of vulnerable clients who are desperate for funding,” he said.
Santam maintains the Western Cape High Court erred in its judgment in applying an 18-month indemnity period across Ma Afrika’s entire policy — referring to the period of time for which policyholders can claim for losses.
The indemnity period in Ma Afrika’s standard business interruption policy was 18 months, but Santam contends that the extension of its policy that covers infectious diseases was only three months.
Santam said on Tuesday it was processing settlements for policies which had three-month indemnity periods regarding the extension, specifically in Santam’s Hospitality and Leisure (H&L) division.
“The 18-month indemnity period applies only to the Ma-Afrika policy and can therefore not be construed as legal precedent, particularly in view of Santam’s intention to appeal this ruling,” the insurer said.
Woolley said on Wednesday that while the Supreme Court of Appeal may ultimately agree with Santam, it may also confirm a legal precedent that clients qualify for payouts for longer terms.
Ma Afrika’s 18-month indemnity period was “an outlier”, he said, but in general it was a basic contract when compared to others signed by Santam clients.
Clients can opt for the length of the indemnity period in their contract, with some opting for 24 months, and the majority of businesses having policies with an indemnity period of a year, he said.
ICA is representing about 219 clients with policies from Santam’s H&L division, and overall there were probably 400 to 500 business affected, he said.
Legal precedent
Santam has acknowledged it is liable for Covid-19 business interruption claims, after a landmark Supreme Court of Appeal ruling against peer Guardrisk in December.
The appeal court dismissed with costs Guardrisk’s appeal against a prior ruling that it compensate Cape Town restaurant Café Chameleon for business interruption losses stemming from Covid-19 and the resulting lockdown.
This confirmed that insurers are liable, provided there was an occurrence of Covid-19 within a designated radius of the insured premises. Santam has said it has noted the recent adverse Supreme Court of Appeal judgment against Guardrisk, and accepted that there is sufficient precedent on the issue.
Santam, however, still intends to go to the appeal court on the issue of the indemnity period, which was not dealt with in the Guardrisk case, and arguments for leave to appeal its case are expected to be heard on February 16.
The Western Cape High Court had rejected Santam’s bid to limit the indemnity period to three months in November, noting that the infectious disease clause was not among 26 items listed under “extensions and clauses”.
The court further noted that some items listed, such as “loss of tourist attraction”, expressly record an indemnity period of three months, while others, such as “bush fire”, did not.
“If Santam wanted to limit the indemnity period for infectious diseases to three months in this contract that it drafted, it could simply have added the clause to the long list of specific extensions,” the judgment read.
As a result of the Ma Afrika ruling Santam raised its continuing business claim provisions in November by R1.7bn, which was in addition to the R1.3bn it raised for its six months to end-June 2020.
Santam said earlier in January that the Café Chameleon Supreme Court of Appeal judgment did not have a significant effect on its net continued business interruption provision.
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